Tencent has brought bad news to the entire Chinese sports industry. Tencent Holdings Group issued a "Notice on the Organizational Structure Adjustment of the OVBU Sports Business Department", announcing the elimination of six major business groups including the Basketball Operations Group, Football Operations Group, Comprehensive Large Project Operations Group, Marketing Center, Product Center/Value-added Products Group, Platform R&D Center/Recommendation Platform Group & Platform R&D Center/Profile and Algorithm Group. The Tencent Sports team originally had a size of about 300 people, and this organizational adjustment may reduce the number of employees by more than one-third. There have been signs of layoffs since 2021. The rumor at the time was that the production and research team with Tencent Sports App as the core business will be directly assigned to the production and research department of Tencent Video, and a small number of employees responsible for information will be assigned to Tencent News. In fact, the comings and goings of people in Internet giants have long been a normal part of life. However, the change at Tencent Sports was unusual, as it happened the day after Tencent suffered its worst quarter in history and against the backdrop of the company's top management's public statements. The financial report shows that in the first quarter of 2022, Tencent achieved revenue of 135.471 billion yuan, the same as the same period last year, and net profit of 25.545 billion yuan, a year-on-year decrease of 23%. It has been three consecutive quarters of net profit decline. Then Tencent’s senior management said in the earnings report conference call that cost control measures have been implemented and some non-core businesses have been adjusted, which will help achieve a more optimized cost structure in the future. Obviously, Tencent Sports, a department established by Tencent in 2003 and which has made great contributions to Tencent, has been classified as "part of the non-core business scope". Rather than saying this is the sadness of Tencent Sports, it is better to say this is the sadness of the entire Chinese sports industry - no matter how dazzling the past was, it can only be exchanged for the result of working for overseas copyright holders, with only traffic. Beat the website The changes in Tencent’s advertising revenue confirm the gradual success of Tencent Sports. There were two major events in the sports world in 2002: the Chinese men's football team entered the World Cup and Yao Ming entered the NBA, which brought China's sports enthusiasm to an unprecedented high. Tencent.com was founded in 2003, along with Tencent Sports. At this time, China's Internet circle was dominated by three giants listed on NASDAQ: NetEase, Sohu, and Sina, which were known as China's three major portals. The sports channels that rely on the traffic of these three websites also have a monopoly in China. Compared with the two "big brothers" Sohu and Sina Sports, which have accumulated a large number of loyal users at the same time, Tencent Sports has a relatively low presence. The turning point came during the 2008 Beijing Olympics. Tencent Sports positioned itself as a company focused on reporting top events by reporting a large amount of Olympic news, replaying highlights, and taking advantage of the championship effect. During the reporting period, the Olympic Channel had a daily average peak traffic of 2.5 million, which was still far behind Sina Olympics' 3.8 million daily average peak visits during the same period, but exceeded NetEase's 2 million. The 2008 Olympic Games was the starting point for the development of Tencent Sports. The 2008 Olympic Games was the starting point for the development of Tencent Sports. Since then, Tencent Sports has been unstoppable. In 2010, Tencent Sports obtained the exclusive authorization from CCTV to broadcast and report the South Africa World Cup in China. At that time, Tencent.com also became the only media in China to report on the World Cup on five continents before the start of the game. In 2012, Tencent Sports obtained exclusive online reporting and interview rights for the Olympic Games, during which time the number of active users increased from 3.2 million to 4.15 million. In 2015, Tencent Sports achieved a milestone in the industry: Tencent obtained the digital media rights for the NBA China Games for five years and the new media broadcasting rights for the 2015-2016 Premier League season. The exclusive rights quickly attracted a large number of adopters, from 4.15 million annual active users at the end of 2014 to more than 10.1 million users at the end of 2015, and the degree of diffusion began to rise sharply. Although we cannot obtain the operating data of the specific sports sector, in the era of websites that rely on advertising as one of the main means of income, the changes in Tencent's advertising revenue also confirm the step-by-step success of Tencent Sports. In 2008, Sina and Sohu's annual advertising revenues were US$258.5 million and US$345.2 million respectively, while Tencent's annual online advertising revenue was only US$120.9 million. By 2015, Sina and Sohu's advertising revenue figures had reached US$743.2 million and US$790 million respectively, while Tencent's online advertising revenue in 2015 was RMB 17.468 billion (approximately US$2.8 billion), a year-on-year increase of 110%. As Tencent's overall growth continues, Tencent Sports has completely surpassed old powerhouses such as Sina Sports and Sohu Sports. Its position within Tencent and the value of Tencent Sports have also risen. In 2015, Tencent Sports became an independent department within Tencent, on par with Tencent.com, Tencent Video and other departments. In 2016, Tencent Sports App was officially launched, and Tencent Sports also officially changed its opponents. Beat App Win the money-burning war. When Tencent Sports was launched, a large number of Internet sports video apps were competing for supremacy. At that time, a number of competitors such as PP Sports and LeTV Sports were eyeing the market, and the sports channels of the other two major video websites, Youku and iQiyi, were also gearing up for a fight. And the way everyone competes is very simple: nothing else but money! For example, in 2015, PPTV, backed by "Suning", squeezed out CCTV Sports Channel and bought the exclusive all-media rights of La Liga in China for 2 billion yuan; in 2016, PP Sports was established. That year, it spent 721 million US dollars (about 4.967 billion yuan) to buy the rights of three seasons of the Premier League. The copyright fee for a single season was 10 times the bid of the previous Chinese buyer, New England Sports. From March to August 2017, PP Sports had acquired the "Seven Dragon Balls" of the five major European leagues, the Chinese Super League, and the Asian Champions League, becoming the focus of the industry. Some people calculated that within five years of its establishment, PP Sports spent more than 10 billion yuan on the purchase of overseas sports copyrights. But this amount of money is probably child's play compared to LeTV Sports. Founded in 2014, LeTV Sports has a resounding slogan - it owns more than 90% of the copyrights of domestic and international sports events, covering mass sports, high-end sports and elite sports without blind spots. Then, LeTV Sports acquired copyrights in an almost crazy way. In just two years, they bought the NBA's Chinese Internet TV broadcasting rights, the exclusive new media broadcasting rights of F1 in mainland China, and the copyrights of 310 events including CBA, AFC Champions League, and Chinese Super League, and more than 10,000 events, of which 72% were exclusive rights. Tencent Sports is not an outsider in this money-burning war. In a sense, it is even the "instigator". In 2015, Tencent Sports, which had just entered the market, spent US$500 million to acquire the exclusive online broadcasting rights of the NBA in China for five years, equivalent to US$100 million per year, which was five times the copyright price in 2013. This shocked the industry and also kicked off a capital-driven "enclosure movement" for sports copyrights. But compared with the unbridled approach of other platforms, Tencent Sports pursues a steady and solid approach. In 2016, Tencent Sports obtained the online copyrights of NCAA, NCAAF, etc., the number of active web users increased to 19.13 million, and the highest monthly number of independent devices of the App maintained a high growth rate; starting from 2017, Tencent successively obtained the copyrights of traditional sports events such as CBA, US Open, Wimbledon, and gradually achieved the goal of full coverage of international Class A events. The number of users increased to more than 24.5 million at the end of 2018; starting from 2019, Tencent Sports took the lead in bringing e-sports to the screen, and the number of users quickly rose to more than 34 million in one year; as of December 2020, the number of Tencent Sports web users has reached more than 40 million, and the number of independent devices of the App is around 13.2 million on average. User coverage has further expanded. In addition, the NBA, which Tencent Sports bet on, has become one of the few profitable sports live broadcast projects. This strategy has allowed Tencent Sports to survive the brutal "money-burning war". LeTV Sports, which was once so prosperous, went from its heyday to a mess in just three years. In 2019, LeTV Sports' business license was revoked. The situation of PP Sports is not optimistic either. In January 2021, PPTV was sued by the Premier League for failing to pay the buyout fee of 523 million pounds on time. Currently, Tencent Sports, iQiyi with Baidu background, and Youku with Alibaba background form the top camp of sports video platforms. Other challengers have almost all lost their voices. It was a wrong payment after all Tencent is not the only one to "shed tears while executing Ma Su". But, business always comes back to making money. After a fierce battle to secure the top spot, Tencent Sports is left with only the challenge of challenging itself, but it finds out: making money is too difficult! As we all know, the bulk of sports event revenue comes from 2B advertising. For example, in 2008, CCTV's advertising revenue from broadcasting the Beijing Olympics reached 2 billion yuan; in 2014, CCTV exclusively broadcast the Brazil World Cup, with advertising revenue exceeding 1.5 billion yuan. However, the current online advertising environment and Tencent's own advertising development are not good. According to data from the Zhongguancun Interactive Marketing Laboratory, the growth rate of China's Internet advertising has gradually declined in the five years from 2017 to 2021. In 2021, due to the impact of the epidemic, the growth rate has dropped below double digits. According to Tencent’s first quarter results for fiscal year 2022, Tencent’s online advertising business revenue fell 16% to 18 billion yuan. Among them, social and other advertising revenue decreased by 15% to 15.7 billion yuan, mainly reflecting the decrease in revenue from the company's advertising resources (especially the mobile advertising alliance); media advertising revenue decreased by 27% to 2.3 billion yuan, reflecting the decrease in advertising revenue from Tencent Video and Tencent News services. Even in the broadcast of Tencent Sports' flagship NBA event, the most popular advertisement was the "global sports protection brand" Durex. Unless Durex paid too much, this must be a helpless move by Tencent Sports due to lack of choice. As advertising has not been able to gain momentum, the paid membership model of almost all sports apps has not been able to establish a healthy business ecosystem. Juchao believes that the reasons are quite complicated: First, due to business pressure, even members of various apps may not be able to see all the content - especially the core content, which requires payment. The "nesting membership" model has been widely criticized; Secondly, due to the high cost of purchasing copyrights, sports apps are forced to continuously raise membership fees when they continue to fail to obtain profit returns, which dampens users’ enthusiasm for paying. Third, the live broadcasts on numerous copyright-free websites continue despite repeated bans, causing the big guys who actually pay the money to pay the "exclusive money" but unable to do the "exclusive business", unable to form a monopoly on the content, resulting in a large number of audiences being diverted. In addition, due to the impact of the epidemic, major top leagues have "closed down" one after another, and the unfavorable economic environment has reduced people's interest in sports spending. A series of sudden "black swan" events have continued to have an impact, and sports are no longer a necessity in people's lives. You will always have to pay for what you have done. Tencent is not the only one to "shed tears and execute Ma Su". In 2020, Youku Sports, which lost out in the competition with Tencent for NBA copyright and failed to merge with PP Sports, laid off more than 20% of its employees. In December 2021, iQiyi, which had been losing money for years, announced news of large-scale layoffs. It is unknown whether iQiyi Sports will fare well. Final Thoughts The Internet sports video platform’s defensive contraction after the great leap forward is just a “valuation repair” in the tide of this great era. The deeper meaning behind this is that in China, the popularity of sports and the embarrassment of the sports industry have coexisted for a long time. Among the three major sports, football is the eternal pain of the Chinese people. Basketball has no bright spots since Yao Ming. Volleyball's record and presence are almost transparent. The women's volleyball team only has a presence during the Olympics. Table tennis and badminton have excellent results, but it is difficult to expand the industrialization and scale. Other events are even more niche, and industrialization is more difficult. Therefore, the current situation of Chinese sports is doomed. Chinese sports video platforms can only rely on foreign high-quality content copyrights, represented by football, basketball and tennis. When the price is too high, the entire Chinese sports content industry becomes an upstream worker, and even the richest tycoons are no exception. As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
<<: Want to upgrade to Android 5.1? Don't click update yet, just wait
Live streaming is currently the most direct and b...
my country has a vast territory, with 9.6 million...
Group interviews, also known as leaderless group ...
As a leading traditional TV manufacturer in China...
Father's Day, as the name suggests, is a holi...
Strategy Analytics' latest research report, &...
If you want to know what kind of community is rel...
Someone asked me: Without money or resources, can...
Recently, Apple phones have once again sparked he...
The latest situation of the novel coronavirus pne...
1. What is Operation ? What is operation? Because...
Although Apple did not release any new hardware p...
Hello everyone, today I, the editor from Sichuan,...
Ever since soft-text masters such as Gu Ye, Wang ...
More and more businesses are paying attention to ...